Work Opportunity Tax Credit

What is the Work Opportunity Tax Credit (WOTC)?

The Work Opportunity Tax Credit (WOTC) is a federal tax incentive program that rewards businesses that hire individuals within certain target groups. Individuals within these target groups are known to experience barriers to employment, so by incentivizing businesses to hire, both the business and the individual benefit. The tax credit allowance varies depending on the target group and number of hours worked, but could be as much as $9,600 per eligible employee. There is no limit to the number of eligible employees that employers can claimed.

Who Qualifies for WOTC?

Businesses that hire new employees in certain target groups are WOTC qualified. WOTC is a federal incentive program for employers that hire workers in certain classes with barriers to employment. The program is administered jointly by the US Treasury Department and US Department of Labor.

Employees in these groups may qualify:

  • TANF recipients
  • Veterans
  • Ex-Felons
  • SNAP recipients
  • SSI recipients
  • Long-term unemployment recipient
  • Designated community and empowerment zone residents
  • Vocational rehabilitation referral

Businesses qualify for a tax credit of as much as $9,600 for each new hire that is WOTC certified and works the required minimum hours or days for their group. The credit is calculated as a percentage of wages paid. See the latest list of target groups published by the US Treasury Department.

Can a business file for WOTC for current employees?

No. Only new hires are considered for this program.

What deadlines must be met to qualify for WOTC?

  1. The new hire must be informed of the program on or before their hire date.
  2. All paperwork and supporting documentation must be submitted within 28 days of start.

How is the tax credit calculated?

There are several factors that go into the tax credit calculation, including the specific target group and total hours worked. Details on WOTC calculation can be found on the WOTC Program page.

Do employers have to participate in WOTC?

No, the program is optional. But why leave money on the table?

Do employees have to participate in WOTC?

No, the program is also optional for employees. But employees benefit from this program that is designed to enhance their value to potential employers.

How do I gather WOTC information from new employees?

Build WOTC qualification into the onboarding process. The employee must be told about the WOTC program when or before they are hired. If you think the employee might qualify and the employee chooses to participate, then you need to gather details. Automated employee onboarding makes this easy by stepping the new hire through a series of questions that determine qualification and gather the necessary details. This process must be complete within the first 28 dates from the start date.

Additional resources

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